Rural revitalization zones, or ZRRs, were created in 1995, by the Loi d'Orientation pour l'Aménagement et le Développement du Territoire. The aim is to encourage economic development in sparsely populated rural areas. As such, you can benefit from tax advantages if you decide to start a business in this type of area. Let's take a look at the assistance and benefits to which you are entitled.
Tax exemptions for business start-ups in rural revitalization zones
Start-up assistance in rural revitalization zones takes the form of tax exemptions. This assistance is available for both business start-ups and takeovers. The exemptions may cover income tax, the economic and territorial contribution (CET), property and housing tax, or social security contributions. Specific conditions must be met. It should also be noted that certain business sectors are excluded from this scheme.
Exemption conditions and economic sectors covered by ZRRs
The first condition is obviously geographical, as the company must be located in a rural revitalization zone. First and foremost, you need to check the list of communes classified as ZRR. This list is available on the website of the French Ministry of the Economy, Finance and Recovery. It is set by two decrees, that of March 16, 2017 and that of February 22, 2018.
The second condition is temporal: the ZRR scheme was designed as a one-off, time-limited measure. Nevertheless, the Finance Act for 2022 extended the exemptions until December 31, 2023.
Finally, the third condition concerns the business sector. Banking, finance, insurance, property management and rental, and fishing are excluded from the exemption from corporate income tax, while shipbuilding, automobile manufacturing, steelmaking, freight transport, construction, leasing and property rental are not eligible for the exemption from social security contributions.
How do the main tax exemptions work?
Companies carrying out all their activities in a rural revitalization zone are eligible for an income tax (IR) or corporation tax (IS) exemption. This option is also available if less than 25% of sales are generated outside the rural revitalization zone. To qualify for the scheme, companies must be subject to a real income tax regime, which means that micro-businesses are not eligible. The company must have fewer than 11 employees on permanent or fixed-term contracts of 6 months or more at the end of the financial year. Capital held by other companies must be less than 50%.
If these conditions are met, the company can take advantage of a total tax exemption for 5 years, then this exemption is degressive over the following 3 years. You can consult the full table of tax and social charge exemptions in ZRRs on the Ministry of Finance website. The tax advantage is capped at 200,000 euros over 3 successive years. It is granted automatically, as soon as the company fills in the dedicated line on the tax income statement. Companies that have been granted a tax exemption on their profits are, unless there is a local provision to the contrary, also exempt from the economic and territorial contribution, i.e., the cotisation foncière des entreprises (CFE) and the cotisation sur la valeur ajoutée des entreprises (CVAE). A specific request must be sent to the company tax department (SIE), using the appropriate CERFA form.
Businesses operating in the accommodation sector, such as bed and breakfasts and certain hotels, can apply for an exemption from property tax and council tax, provided that the local authorities have approved a total or partial exemption.
Exemption from social security contributions in rural revitalization zones
Companies starting up a business in a rural revitalization zone can be exempted from employer social security and family allowance contributions for the hiring of their employees, for a period of 12 months. This exemption applies to the workforce of 1 to 50 employees. It is total up to 1.5 times the SMIC. It is degressive between 1.5 and 2.4 times the SMIC.
Other social contributions are due, in particular employer's unemployment contributions, supplementary pension contributions, workplace accident contributions, social dialogue contribution, mobility payment, CSG, CRDS, employee contributions and mobility allowance.
Exemptions for new hires in rural revitalization zones are governed by Article L. 241-19 of the French Social Security Code. The law stipulates that the State, local authorities, public administrative establishments, individual employers and companies covered by special schemes such as the French Post Office and the SNCF are not eligible.
Do you think you qualify for tax exemption for starting up or taking over a business in a rural revitalization zone? Make sure you check all the conditions and submit your application on the appropriate forms.